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Here's Why CRISPR Therapeutics Has Lost One-Third of Its Value Since September

A share offering didn't help. Investors also began to wonder: Was a $2.5 billion market cap justified?

What happened

Shares of CRISPR Therapeutics(NASDAQ:CRSP) fell 21.7% last month and 33.3% in the last six weeks, according to data provided by S&P Global Market Intelligence. The stock market's most valuable CRISPR stock by market cap has been falling back to earth in recent months after briefly eclipsing a $3 billion valuation earlier this summer.

In addition to investors slowly readjusting the biopharma's market cap over time, CRISPR Therapeutics stock was driven lower by the completion of a share offering in mid-September. It was a smart move financially, as it nearly doubled the amount of cash on the balance sheet from the end of June, but the $230 million in gross proceeds also increased the number of shares outstanding by 10%. Dilution isn't the only thing on the minds of investors.

Image source: Getty Images.

So what

While the leading CRISPR companies are flush with cash, they're all going to need strong balance sheets to conduct global clinical trials. So although share dilution stings, raising large sums of money -- and quickly via share offerings -- is a necessary part of being a development-stage biopharma.

CRISPR Therapeutics will be the first to put its war chest to use in the clinic. The company and its partner Vertex Pharmaceuticals recently began clinical trials in Europe for their lead drug candidate, CTX001, as a treatment for the blood disorder beta-thalassemia. That will be followed soon by clinical trials in the United States investigating the drug candidate's potential to treat sickle cell disease (another blood disorder), which may now proceed after the U.S. Food and Drug Administration lifted a clinical hold on the therapy.

Now what

While investors have been awaiting the day that CRISPR-based drug candidates enter clinical trials in the United States, the news was received with relatively mild movement in the stock price -- and certainly not enough to erase the recent slide. That's likely because the announcement was largely expected. And because investors know that the now-$1.8 billion company has a long road ahead of it.

Author

Maxx has been a contributor to Fool.com since 2013. He graduated from the State University of New York College of Environmental Science and Forestry (2012) with a Bachelor of Science in Bioprocess Engineering and from Carnegie Mellon University (2016) with a Master of Science in Materials Science & Engineering.